188 Copyright © 2011, IGI Global. Copying or distributing in print or electronic forms without written permission of IGI Global is prohibited. DOI: 10.4018/978-1-60960-071-6.ch012 Chapter 12 Knowledge Asset Dynamics and Firm Performance: Empirical Evidence from the IT Industry Karim Moustaghfr University Al Akhawayn, Morocco INTRODUCTION Knowledge assets represent the intangible re- sources that a firm owns (Hall, 1992) mainly in the form of employees’ skills and know-how and intellectual property rights. Such assets support the firm’s capabilities, activities, and products. Knowledge assets are dynamic in nature (Roos & Roos, 1997), depend on and interact with each other over time (Barney, 2001; Kaplan and Nor- ton, 2004). Organizational learning mechanisms enable this interconnectivity between knowledge assets, and renew and enhance constantly their value (Argyris & Schön, 1978; Lei et al., 1996; Pemberton & Stonehouse, 2000). Knowledge management processes such as knowledge iden- tification, knowledge sharing, knowledge storing and application, support the organizational learn- ABSTRACT In an economy characterized by rapid change, continuous innovation and high intensity and dynamism of competition, the analysis of strategy and competitive advantage has shifted from the more aggregate competitive forces to the idea that frms are essentially different and compete on the basis of their specifc physical, human and organizational resources. The key to this new view of the frm as a collection of resources both human and material is understanding the relationships between resources, capabilities, competitive advantage, and proftability, in particular, an understanding of the mechanisms through which competitive advantage can be sustained over time. Even if knowledge assets have been widely recognized as the frm’s main value drivers, little guidance is provided of how these unique attributes affect the frm’s proftability and its overall performance. Through a case study research in the IT sector, this chapter provides empirical evidence as regards such interdependencies and analyze the effects of knowledge asset dynamics on frm’s performance and value creation mechanisms.